Column: For Future Needs
In 2050, India will need four times the energy it consumed in 2016. It is time to start planning for such requirements
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Just last week PwC’s Economics & Policy team released a report, “The Long View: How will the global economic order change by 2050”, tracing out the broad shape of economic power shifts over this period.
We projected that the world economy would more than double in size by 2050, assuming broadly growth-friendly policies. Emerging markets will continue to be the growth engine of the global economy. By 2050, the E7 economies would have increased their share of world GDP from around 35 per cent to almost 50 per cent. India would be in second place after China based on GDP at private-public partnetships. In terms of growth, India would be the fastest growing economy at around 5 per cent a year due to lower initial average income levels providing greater scope for catch-up growth.
For India, causality link between the consumption of primary energy and the GDP has been proven. Also, the prominence of oil and gas in meeting primary energy requirement will continue. Despite improving efficiency of consumption, in 2031, India will demand two and a quarter times energy consumed in 2016, and four times in 2050. For a country relying on over 80 per cent imported hydrocarbons, the planning for these levels cannot be left to chance.
Also, thirty three years for energy industry is not long. The to-be-CEOs of oil & gas companies in 2050 have already joined the profession a few years back. Finding and developing oil & gas fields take 10 to 15 years. Similarly, new born companies, or restructured entities take anything from 10 to 20 years to establish in exploration and production, gas, midstream and refining industry. The need for energy blue prints for 2030 and 2050 are real and relevant, demanding clear direction.
The projection that India will be world’s second largest economy and the attendant energy demand projections have provided a strong foundation for deciding the course for the recently announced “mega-merger” of state-owned oil and gas companies — being the first to be considered in the merit order.
In December 2016, PwC went public with the disruptive thought of forming a super joint venture to operate the United Kingdom Continental Shelf (UKCS) oil & gas industry with fifty successful years of North Sea basin, for planning a sustainable success in the coming decades. The survey participants echoed that bringing forces together to harness the expertise, imagination and tenacity will be perfectly in order. So is the case for the Indian oil and gas industry too.
In India, the oil and gas industry is fragmented with no clear benefits. For example, there are over seven companies with government-run refineries. The tenets of minimum government come into play too. None of the energy-intensive economies have done well without private sector investments, agility and efficiencies. Many governments found taxes, royalties and production/revenue shares more rewarding and assured than dividends of national oil companies.
The mega-merger planning and implementation will have to withstand the pressures from administration and executives involved. Since effective implementation will take five to 10 years, it will also test the political will.
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